It may be time to “buy the fear” with financial stocks.

With a lot of the financial catastrophe priced in, some of the biggest, and safer bank stocks have become ridiculously oversold, such as Charles Schwab (SCHW), for example. 

For one, as noted by Seeking Alpha, “Schwab is a very different beast from Silicon Valley. Most of the clients of the latter were early-stage companies. Meanwhile, Schwab has 33.8 million brokerage clients, over 1.7 million banking accounts and as many as 2.4 million corporate retirement plans. This is a very diversified clientele, and a bank run would require millions of individuals to take their funds away, not just a few hundred companies. Even if this did happen, Schwab has, in theory, the necessary liquidity.”

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Two, insiders have been buying.  CEO and Co-Chairman of Charles Schwab, Walter Bettinger bought about 50,000 shares of the company for a total value of about $3 million.

Three, analysts say the pullback is overdone. Morgan Stanley analyst Michael Cyprys noted that SCHW’s “sharp sell-off presents a compelling entry point for a high- quality franchise that should be able to better navigate liquidity risks than the market prices in, given significant financial strength/ flexibility, liquidity profile and significant earnings/capital generation.”

Sincerely,

Ian Cooper